Petrol price fall grinds to a halt

Drivers in many towns being charged £2 a tank more than in neighbouring towns

Drivers in many towns being charged £2 a tank more than in neighbouring towns

A fall in the UK’s average petrol price has ground to a halt just 2p below the year high of 140p a litre in early March. This is despite a 3p-4p fall in wholesale costs, with VAT, from late February into the middle of March, says the AA.

Although the full wholesale savings have been reflected by some retailers, the failure of others to match them has left drivers in many towns being charged £2 a tank more for the cheapest petrol than in neighbouring towns over Easter.

The average price of petrol in the UK hit a year high of 140.03p a litre on 3 March and fell to 137.72p on 24 March. Since then, petrol pump prices have stalled close to 137.9p a litre and averaged 137.84p yesterday.

Wholesale

Wholesale petrol costs started to rise again last week as the market anticipated greater demand with the start of the US motoring season, a sentiment that has come unstuck in recent summers as high fuel prices forced US motorists to cut back. The improved strength of the pound against the dollar has helped to reduce the impact on UK pump prices so far.

Diesel

Average diesel prices continue to fall, down from a year high of 146.46p a litre on 4 March to 143.57p yesterday. Record prices were set in April last year, with petrol hitting 142.48p a litre and diesel 147.91p.

the extent and severity of price swings since 2008 are likely to have a lasting impact, such as more smaller cars, changed shopping patterns and car fuel budget sensitivity

Edmund King, AA president

Comment

"Fuel pricing in the UK, US, and Europe over the past 12 months has been characterised by a series of severe spikes, surging petrol prices up and down by the equivalent of 10p a litre. This has had a severe impact on consumer demand. Although previous price spikes since the 1970s have eventually been offset by improved wages, the extent and severity of price swings since 2008 are likely to have a lasting impact, such as more smaller cars, changed shopping patterns and car fuel budget sensitivity, “ says Edmund King, the AA’s president.

"Unlike the US, drivers in the UK and Europe have been left high and dry by the lack of fuel price transparency. This has denied them the ability to spot short-term pump price spikes and prepare their budgets and planning for the hit. It has also allowed retailers to decide when and where savings for this essential part of family spending are passed on. The OFT failed to recognise this in January and the Government must resurrect Justine Greening's Department for Transport initiative on fuel price transparency.

King adds: "When the Coryton refinery was closed, the UK was told that surplus production in other UK refineries would make up the shortfall. Instead, the stock market has seized on refinery closures to justify pushing up the price of petrol. In February, this helped to push monthly UK petrol consumption to its lowest in recent history.

Consumer demand

Critical to the understanding of the fuel market is the impact of pricing on consumer demand. For instance, in 2008, when the gap between the price of petrol and more expensive diesel exceeded 13p a litre, the 'dash' for diesel cars ended. The differential and higher cost of buying a diesel car negated the savings from diesel's better fuel efficiency.

Energy taxation directive

Additionally, the future impact of the EU's Energy Taxation Directive is being closely watched. This will take into account the CO2 emissions and energy content of a fuel in deciding tax. European countries that have incentivised the use of diesel through favourable taxation could find the tables turned. That may severely affect the European diesel market.